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NASDAQ: INTC

INTEL CORP
Report created Jan 16, 2009 Page 1 OF 5

Intel supplies the computing industry with the chips, boards, systems and software that are the primary Argus Recommendations
components of computer architecture. Intel has also expanded through acquisitions, although these
businesses are now being reviewed and in some cases sold to other semiconductor firms. Intel has the
largest market share in the semiconductor industry. Twelve Month Rating SELL HOLD BUY
Under Market Over
Analyst's Notes Sector Rating Weight Weight Weight

Analysis by Wendy Abramowitz, January 16, 2009 Argus assigns a 12-month BUY, HOLD, or SELL rating to each
stock under coverage.
ARGUS RATING: HOLD
• BUY-rated stocks are expected to outperform the market (the
benchmark S&P 500 Index) on a risk-adjusted basis over the
• INTC: Capex requirements to limit free cash flow in 2009 next year.
• Inventories at both Intel and in its distribution channel are bloated, requiring at least one quarter to be • HOLD-rated stocks are expected to perform in line with the
corrected; during the last recession, the inventory correction took longer than anticipated. market.
• SELL-rated stocks are expected to underperform the market
• We are lowering our FY09 EPS estimate to $0.56 from $0.83 and initiating an FY10 forecast of $0.79. on a risk-adjusted basis.
• With earnings and free cash flow expected to remain under pressure in the coming year we look for The distribution of ratings across Argus' entire company
the stock to hold a similar pattern. universe is: 47% Buy, 43% Hold, 9% Sell.

• INTC is trading at a P/E premium to the S&P 500 even though we expect a steeper earnings decline
for the company than the broad market this year. Our rating is HOLD. Key Statistics
Key Statistics pricing data reflects previous trading day's closing
INVESTMENT THESIS price. Other applicable data are trailing 12-months unless
otherwise specified
We are maintaining our HOLD rating on Intel Corp. (NGS: INTC). While Intel's
product portfolio of new microprocessors should give it wider exposure to the PC, server Market Overview
Price $13.29
and consumer electronics spaces, we expect economic conditions to continue to hinder
Target Price --
growth in these markets, pressuring Intel's top and bottom lines for most of this year.
52 Week Price Range $12.06 to $25.29
Furthermore, capital spending requirements are likely to minimize free cash flow. We thus
Shares Outstanding 5.56 Billion
find the stock fairly valued at current prices. However, long-term investors looking for Dividend $0.56
some income may find INTC interesting, with the dividend yield currently at 4.3%.
Sector Overview
RECENT DEVELOPMENTS Sector Technology
Intel reported a dismal fourth-quarter profit of just $0.04 per share, but we note that Sector Rating MARKET WEIGHT
this reflects an impairment charge of $1 billion or $0.11 per share on the company's Total % of S&P 500 Market Cap. 16.00%
investment in Clearwire. Furthermore, the tax rate of 36.6% was greater than the 29% Financial Strength
management had anticipated, reducing the bottom line by another $0.02 per share. Financial Strength Rating MEDIUM-HIGH
Excluding the noncash impairment charge puts non-GAAP EPS at $0.15 for the fourth Debt/Capital Ratio 4.7%
quarter. Return on Equity 15.3%
Gross margins of 53.1% were dragged down by about 6 points from the Net Margin 14.1%
underutilization of factories and inventory write-downs. Indeed, inventory is the major Payout Ratio 1.00
issue of the day. Recall that as we entered the last recession, Intel had a substantial amount Current Ratio 2.79
Revenue $37.59 Billion
After-Tax Income $5.29 Billion
Market Data Pricing reflects previous trading week's closing price.
200-Day Moving Average 52 Week High: $25.29 52 Week Low: $12.06 Closed at $14.15 on 1/9 Valuation
Price Current FY P/E 23.73
($) Prior FY P/E 12.90
25 Price/Sales 1.97
Price/Book 1.90
20 Book Value/Share $7.00
Market Capitalization $73.92 Billion
15
Forecasted Growth
1 Year EPS Growth Forecast
Rating BUY
HOLD -45.63%
SELL
5 Year EPS Growth Forecast
EPS 10.00%
($)
1 Year Dividend Growth Forecast
0.06
1.82%
Quarterly 0.28 0.22 0.31 0.38 0.25 0.28 0.35 0.15 0.10 0.18 0.23 0.17 0.18 0.21 0.23
1.18 1.03 0.56 ( Estimate) 0.79 ( Estimate)
Risk
Annual
Beta 1.01
Revenue
($ in Bil.) Institutional Ownership 63.85%

Quarterly 8.9 8.7 10.1 10.7 9.7 9.5 10.2 8.2 7.3 7.6 8.0 8.6 8.2 8.5 9.0 9.2
Annual 38.3 37.6 31.6 ( Estimate) 34.9 ( Estimate)
FY ends Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Dec 31 2007 2008 2009 2010

Please see important information about this report on page 5

©2009 Argus Research Company Argus Analyst Report

 NASDAQ: INTC

INTEL CORP
Report created Jan 16, 2009 Page 2 OF 5

Analyst's Notes...Continued
of inventory on hand, and inventory in the distribution channel
was also bloated. It took several quarters to work this down both
internally and externally, hurting Intel's revenues and gross
margins. In its recent conference call, the company said it expected
the extra inventory to be worked down faster in the current
recession, given the improvements made in the supply chain over
the past eight years.
Nonetheless, the outlook for the current quarter - management
is assuming revenues of $7 billion in its planning, compared to our
slightly more optimistic forecast of $7,3 billion - suggests very little
improvement in the end market. Gross margins will remain under
pressure due to continued underutilization, 32 nanometer startup
costs and the likelihood, in our view, of further inventory
write-downs in the notebook space.
EARNINGS & GROWTH ANALYSIS
For all of fiscal 2008, Intel posted revenues of $37.6 billion, a
year-over-year decline of 2%. Both gross and operating margins
improved, but this was offset by losses in equity investments,
decline interest income and a higher tax rate, putting GAAP EPS at
$0.92 for the year; adjusted for the $1 billion noncash charge
discussed earlier, non-GAAP EPS were $1.03 in FY08.
For FY09, we are reducing our EPS estimate to $0.56 from
$0.83. This reflects our expectations for continued weakness in the
PC, server and consumer electronics spaces this year, gross margin
pressures in the first half, and further restructuring charges of
about $300 million. For FY10, our initial EPS estimate is $0.79.
FINANCIAL STRENGTH & DIVIDEND
Our financial strength rating for Intel is Medium-High. Total
debt/cap at the end of 4Q08 was 4.8%, down from 5.7% in the
prior quarter. Inventory turns, at 4.3-times, continued the
sequential declines seen since 1Q08. Operating cash flow for the
quarter was $2.6 billion, but subtracting capital expenses of $1.8
billion and dividends of $778 million puts free cash flow for the
quarter at just $17 million. Annualized revenue per employee of
$442,000 for the quarter improved from the prior-year period's
$425,000 but fell from the prior quarter's $467,000.
INTC currently pays an annualized dividend of $0.56 per share,
for a yield of about 4.3%. CEO Paul Otellini stated in the
conference call that the company had no intention of reducing or
eliminating the dividend. However, with earnings in 2009 and
2010 expected to remain below the levels of 2007 and 2008, we
expect Intel's dividend to remain flat.
RISKS
Intel faces risks associated with an antitrust lawsuit filed by
competitor AMD, which claims that Intel has forced major
customers into deals that require them to stop or reduce their
business with AMD. We note that AMD's former CEO, Hector
Ruiz, was instrumental in the filing of this suit. With Dirk Meyer
now in charge, it remains to be seen how this issue will play out.
Another risk for Intel is the weakness in PC, server and

Growth & Valuation Analysis Financial & Risk Analysis

GROWTH ANALYSIS
($ in Millions, except per share data) 2003 2004 2005 2006 2007
FINANCIAL STRENGTH 2005 2006 2007
Revenue 30,141 34,209 38,826 35,382 38,334
Cash ($ in Millions) 7,324 6,598 7,307
COGS 13,047 14,463 15,777 17,164 18,430
Working Capital ($ in Millions) 11,960 9,766 15,314
Gross Profit 17,094 19,746 23,049 18,218 19,904
Current Ratio 2.30 2.15 2.79
SG&A 4,278 4,659 5,688 6,096 5,401
LT Debt/Equity Ratio (%) 5.8 5.0 4.6
R&D 4,365 4,778 5,145 5,873 5,755
Total Debt/Equity Ratio (%) 5.8 5.0 4.6
Total Expenses 22,608 24,079 26,736 29,730 30,118
Operating Income 7,533 10,130 12,090 5,652 8,216 RATIOS (%)
Interest Expense -186 -251 -558 -612 -789 Gross Profit Margin 59.4 51.5 51.9
Other Items -91 287 520 1,416 950 Operating Margin 31.1 16.0 21.4
Pretax Income 7,442 10,417 12,610 7,068 9,166 Net Margin 22.3 14.3 18.2
Income Taxes 1,801 2,901 3,946 2,024 2,190 Return On Assets 17.7 10.5 13.4
Tax Rate (%) 24 28 31 29 24 Return On Equity 22.8 13.9 17.6
Net Income 5,641 7,516 8,664 5,044 6,976
RISK ANALYSIS
Diluted Shares Outstanding 6,621 6,494 6,178 5,880 5,936
Cash Cycle (days) 40.5 49.2 39.7
EPS 0.85 1.16 1.40 0.86 1.18
Cash Flow/Cap Ex 2.8 1.9 2.6
Dividend 0.08 0.16 0.32 0.40 0.45
Oper. Income/Int. Exp. (ratio) -21.7 -9.2 -10.4
GROWTH RATES (%) EPS/Dividend (ratio) 4.4 2.2 2.6
Revenue 12.66 13.55 11.27 -7.09 8.37
Gross Profit 28.46 15.57 14.41 -19.36 9.29 The data contained on this page of this report have been
Operating Income 72.23 34.61 16.96 -52.18 45.55 provided by Mergent, Inc. and is set forth herein for
Net Income 81.34 33.37 13.00 -40.51 38.46 historical reference only. These data are not necessarily
EPS — 36.47 20.69 -38.57 37.21 used in Argus’ analysis of the stock set forth on this page
Dividend — 200.00 200.00 125.00 112.50 of this report or any other stock or other security. These
VALUATION ANALYSIS data may be incomplete or absent. All earnings figures
are in GAAP. A data dictionary provided by Argus includes
Price: High $34.12 $24.80 $28.71 $26.47 $27.98
more detailed information about these data. Please see
Price: Low $27.52 $19.68 $21.99 $16.86 $18.86
the final page of this report for additional information on
Price/Sales: High-Low —-— —-— —-— —-— —-— Mergent, Inc. and the data dictionary.
P/E: High-Low 39.7 - 32.0 21.2 - 16.8 20.2 - 15.5 30.4 - 19.4 23.3 - 15.7
Price/Cash Flow: High-Low 19.3 - 15.6 12.1 - 9.6 12.0 - 9.2 14.4 - 9.2 12.9 - 8.7

Please see important information about this report on page 5

©2009 Argus Research Company Argus Analyst Report

 NASDAQ: INTC

INTEL CORP
Report created Jan 16, 2009 Page 3 OF 5

Analyst's Notes...Continued
consumer electronics product sales well into 2009.
VALUATION
INTC shares are trading at 24.3-times our 2009 EPS estimate
and 17-times our 2010 EPS estimate, suggesting premiums to our
expectations for the broad market. In our view, this is unwarranted
given that the earnings decline we forecast for Intel this year is
greater than Argus's projected decline in S&P 500 earnings. Taking
recent trends into account and factoring in valuation multiples seen
during other economic downturns, we now project a fundamental
trading range of $8-$16 per share over the next 12 months, while
our two-stage discounted cash flow model points to a value of $11.
Blending these approaches, we arrive at a value for INTC of $12
per share, in line with current prices.
On January 16 at midday, HOLD-rated INTC traded at
$13.64, up $0.35.
Analysis by Wendy Abramowitz, January 7, 2009
ARGUS RATING: HOLD
• INTC: Downgrading to HOLD as EPS remains under pressure
• Intel's near-term prospects appear dismal due to the impact of the global
economy on its end-user base. The company reported preliminary 4Q08
revenues of $8.2 billion, more than 20% below its initial 4Q guidance.
• We expect revenues to remain weak at least through the first half of
2009, and are cutting our full-year EPS estimate to $0.83 from $1.19.
• We expect Intel's dividend to remain flat this year at $0.56, for a yield of
about 3.8%.
• Intel remains one of the few chipmakers that require heavy capital
spending to drive innovation. As such, we expect the company's free cash
flow to be minimal in 2009.
INVESTMENT THESIS
We are lowering our 12-month rating on Intel Corp. (NGS:
INTC) to HOLD from BUY as we expect 2009 to be a very
difficult year for the company. However, our long-term rating
remains BUY as we look for Intel to rebound towards the end of
the year and into 2010. Still, the company's near-term prospects
appear dismal due to the impact of the weak global economy on
end users of Intel microprocessors and chipsets. Furthermore, we
note that Intel remains one of the few semiconductor
manufacturers that require heavy capital spending to drive
innovation; these days, most other chipmakers outsource their
capital projects. For that reason, we expect Intel's free cash flow to
be minimal in 2009.
RECENT DEVELOPMENTS
Intel warned that fourth-quarter results would be well below
prior guidance, which had already been reduced in November. In
fact, the preliminary revenue figure of $8.2 billion is more than
20% below the initial guidance provided during the third-quarter
conference call (at that point, management projected revenues of

Peer & Industry Analysis

The graphics in this section are designed to
P/E
allow investors to compare INTC versus its FSLR Growth
industry peers, the broader sector, and the INTC vs.
market as a whole, as defined by the Argus INTC Market
ADI
AMAT
TXN
Universe of Coverage. LSI BRCM
ONNN
INTC vs.
0 Sector
• The scatterplot shows how INTC stacks up More Value More Growth
versus its peers on two key
characteristics: long-term growth and Price/Sales
value. In general, companies in the lower INTC vs.
left-hand corner are more value-oriented, Market
while those in the upper right-hand corner -50 INTC vs.
are more growth-oriented. Sector
More Value More Growth
• The table builds on the scatterplot by
displaying more financial information. Price/Book
• The bar charts on the right take the INTC vs.
-100
analysis two steps further, by broadening KLAC Market
the comparison groups into the sector INTC vs.
level and the market as a whole. This tool Sector
is designed to help investors understand More Value More Growth

Value 10
P/E

how INTC might fit into or modify a PEG

20 30 40
diversified portfolio.
5-yr Growth Rate(%) INTC vs.
Market
5-yr Net 1-yr EPS INTC vs.
Market Cap Growth Current Margin Growth Argus Sector
More Value More Growth
Ticker Company ($ in Millions) Rate (%) FY P/E (%) (%) Rating
INTC Intel Corp 73,919 10.0 23.7 14.1 41.1 HOLD 5 Year Growth
TXN Texas Instruments Inc 18,850 10.0 10.1 18.9 -61.8 HOLD INTC vs.
AMAT Applied Materials Inc 12,890 11.0 13.3 11.8 49.3 BUY Market
INTC vs.
FSLR First Solar Inc 11,562 37.0 37.1 27.5 70.1 BUY Sector
BRCM Broadcom Corp 8,536 15.0 10.0 10.2 -24.6 BUY More Value More Growth
ADI Analog Devices Inc 5,562 12.0 13.5 30.4 12.0 BUY Debt/Capital
KLAC KLA Tencor Corp 3,473 13.0 -102.8 12.3 375.0 HOLD
INTC vs.
LSI LSI Corp 2,045 10.0 7.9 -71.8 -50.0 HOLD Market
ONNN ON Semiconductor Corp 1,676 18.0 4.9 9.5 8.4 BUY INTC vs.
Peer Average 15,390 15.1 2.0 7.0 46.6 Sector
More Value More Growth

Please see important information about this report on page 5

©2009 Argus Research Company Argus Analyst Report

 NASDAQ: INTC

INTEL CORP
Report created Jan 16, 2009 Page 4 OF 5

Analyst's Notes...Continued
$10.1-$10.9 billion). Clearly, the seasonal impact was extremely downturns, we now project a fundamental trading range of $8-$18
negative and we suspect that pressure will continue into at least the per share over the next 12 months, while our two-stage discounted
first half of 2009. We note that attendance at this year's Consumer cash flow model points to a value of $15. Blending these
Electronics Show (CES), currently taking place in Las Vegas, has approaches, we arrive at a value for INTC of $14 per share, in line
fallen sharply from last year. with current prices. We are thus lowering our rating to HOLD.
Intel is attempting to expand its end markets beyond On January 7, HOLD-rated INTC closed at $14.44, down
microprocessors for PCs and servers by moving into solid state $0.93.
drives (SSD) and mobile devices such as netbooks and other types
of mobile internet devices (MIDs). However, we believe that
success in these areas will take time. This is particularly true in the
case of SSDs, where Intel is likely to see very limited initial
acceptance due to its high prices.
EARNINGS & GROWTH ANALYSIS
For the fourth quarter, Intel noted that gross margins would be
about 55% and that operating expenses would total approximately
$2.6 billion, or about $200 million less than prior guidance.
Factoring this into revenues of $8.2 billion brings us to 4Q08
non-GAAP EPS of $0.19. Our model excludes a non-cash charge
related to the impairment value of Intel's investment in Clearwire,
which will further hurt the bottom line. Our full-year 2008
non-GAAP EPS estimate is now $1.07, down from a prior $1.13.
For 2009, we are cutting our estimate to $0.83 from $1.19. Our
model assumes a roughly 12% decline in revenue with a negative
gross margin impact of about 150 basis points, and projects that
the company's business will remain under pressure for the first
three quarters of 2009. We are also lowering our long-term growth
rate estimate to 10% from 15%.
FINANCIAL STRENGTH & DIVIDEND
We are lowering our financial strength rating for Intel to
Medium-High from High. In 3Q08, Intel had $1.4 billion of
finished goods in inventory, which accounted for 41% of the total.
A write-down of some of this inventory seems likely. We believe
that operating cash in 2008 will be down from last year, and that
this trend may continue into 2009.
INTC currently pays an annualized dividend of $0.56 per share,
for a yield of about 3.8%. Given our expectations for weak
earnings next year, we believe that the dividend will remain at
current levels.
RISKS
Intel faces risks associated with an antitrust lawsuit filed by
competitor AMD, which claims that Intel has forced major
customers into deals that require them to stop or reduce their
business with AMD. We note that AMD's former CEO, Hector
Ruiz, was instrumental in the filing of this suit. With Dirk Meyer
now in charge, it remains to be seen how this issue will play out.
Another risk for Intel is the weakness in PC, server and
consumer electronics product sales well into 2009. Two customers,
Dell and Hewlett-Packard, together accounted for 25% of Intel's
revenue in 2007. Accordingly, the loss of business from either
company could have a material impact on Intel's financial results.
VALUATION
INTC shares are trading at 17.3-times our EPS estimate for
2009, which suggests a premium to our expectations for the broad
market. In our view, this is unwarranted given that the earnings
decline we forecast for Intel is greater than Argus's projected
decline in S&P 500 earnings. Taking recent trends into account
and factoring in valuation multiples seen during other economic

Please see important information about this report on page 5

©2009 Argus Research Company Argus Analyst Report

 NASDAQ: INTC

METHODOLOGY & DISCLAIMERS Report created Jan 16, 2009 Page 5 OF 5

About Argus
Argus Research, founded by Economist Harold Dorsey in 1934,
has built a top-down, fundamental system that is used by Argus
analysts. This six-point system includes Industry Analysis, Growth
Analysis, Financial Strength Analysis, Management Assessment,
Risk Analysis and Valuation Analysis.
Utilizing forecasts from Argus’ Economist, the Industry Analysis
identifies industries expected to perform well over the next
one-to-two years.
The Growth Analysis generates proprietary estimates for
companies under coverage.
In the Financial Strength Analysis, analysts study ratios to
understand profitability, liquidity and capital structure.
During the Management Assessment, analysts meet with and
familiarize themselves with the processes of corporate management
teams.
Quantitative trends and qualitative threats are assessed under
the Risk Analysis.
And finally, Argus’ Valuation Analysis model integrates a
historical ratio matrix, discounted cash flow modeling, and peer
comparison.
THE ARGUS RESEARCH RATING SYSTEM
Argus uses three ratings for stocks: BUY, HOLD, and SELL.
Stocks are rated relative to a benchmark, the S&P 500.
• A BUY-rated stock is expected to outperform the S&P 500 on
a risk-adjusted basis over a 12-month period. To make this
determination, Argus Analysts set target prices, use beta as the
measure of risk, and compare expected risk-adjusted stock
returns to the S&P 500 forecasts set by the Argus Market
Strategist.
• A HOLD-rated stock is expected to perform in line with the
S&P 500.
• A SELL-rated stock is expected to underperform the S&P 500.

Argus Analyst Report Data Dictionary

For important information (including data definitions) about the Argus and Mergent data used in this report, please view the Argus Analyst Report Data Dictionary (PDF) at
www.ArgusResearch.com/DataDictionary.

Argus Research Disclaimer

Argus Research is an independent investment research provider and is not a member of the FINRA or the SIPC. Argus Research is not a registered broker dealer and does not have
investment banking operations. The Argus trademark, service mark and logo are the intellectual property of Argus Group Inc. The information contained in this research report is
produced and copyrighted by Argus, and any unauthorized use, duplication, redistribution or disclosure is prohibited by law and can result in prosecution. The content of this report
may be derived from Argus research reports, notes, or analyses. The opinions and information contained herein have been obtained or derived from sources believed to be reliable,
but Argus makes no representation as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. This report is not an offer to sell or a solicitation of
an offer to buy any security. The information and material presented in this report are for general information only and do not specifically address individual investment objectives,
financial situations or the particular needs of any specific person who may receive this report. Investing in any security or investment strategies discussed may not be suitable for
you and it is recommended that you consult an independent investment advisor. Nothing in this report constitutes individual investment, legal or tax advice. Argus may issue or may
have issued other reports that are inconsistent with or may reach different conclusions than those represented in this report, and all opinions are reflective of judgments made on the
original date of publication. Argus is under no obligation to ensure that other reports are brought to the attention of any recipient of this report. Argus shall accept no liability for any
loss arising from the use of this report, nor shall Argus treat all recipients of this report as customers simply by virtue of their receipt of this material. Investments involve risk and an
investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance. Argus has provided independent research
since 1934. Argus officers, employees, agents and/or affiliates may have positions in stocks discussed in this report. No Argus officers, employees, agents and/or affiliates may
serve as officers or directors of covered companies, or may own more than one percent of a covered company’s stock.

Mergent Disclaimer
Certain financial information included in this report is proprietary to Mergent, Inc. ("Mergent") Copyright © 2009. Reproduction of such information in any form is prohibited. Mergent
does not guarantee the accuracy, adequacy, completeness, timeliness or availability of any information and is not responsible for any errors or omissions or for the results obtained
from the use of such information. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
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information.

©2009 Argus Research Company Argus Analyst Report